Good Measure

The state’s richest man recounts how getting nudged from an ivory-tower nest eventually sent SAS soaring.

As told to Spencr Campbell

The billionaire surrounds himself with priceless treasures. Some glisten, others overwhelm, most are indescribable to the uninformed. All are rocks. As a child in Greensboro, he envied his friends’ father’s collection, believing glasslike quartz to be a sign of great success. Today, James Goodnight owns a meteorite. He’s definitely made it — with a fortune Forbes magazine estimates at $7.2 billion — though he won’t admit it. “If you ever stop and pat yourself on the back — ‘we’ve made it, let’s relax’ — you’ll be gone.” He amassed that wealth with Cary-based SAS Institute Inc., the world’s largest privately owned software company, which he co-founded with fellow N.C. State University computer programmers in 1976. SAS pioneered business-analytic software, allowing companies to mine data. Top pay and perks, including on-site health clubs, doctors and free M&Ms (it goes through 23,000 pounds a year), help rank it second on Fortune magazine’s Best Companies to Work For. Goodnight, 70 and still CEO, recalls what led him to leave State and start what is now No. 3 on Grant Thornton LLP’s ranking of North Carolina’s top 100 private companies, with $2.9 billion of revenue last year. The interview has been edited for brevity and clarity.

I first got interested my sophomore year of college. Someone told me about this course in computers. I had no idea what a computer was. I walked by a lab to see one of these things, and there was this electric typewriter typing by itself. There was nobody there. It was typing by itself. And I said, “My God, I want to learn how to do that.” I signed up right there. The first two or three weeks I couldn’t figure out what was going on. Suddenly, a light bulb went off. Oh. Oh! After that, I just picked it up and ran with it.

I had gotten halfway through my master’s degree. I was just tired of working and studying all the time, so I decided to leave and get a job. I went down to Florida to work for a contractor on NASA’s Apollo project. Ann and I had been dating eight or nine months, and I convinced her to marry me and move to Florida. Her father had cancer, and she was going back up to visit him, and I finally said, “Look, I’ll call N.C. State and see if they’ll take me back.” They said, “Yes, please come back.” So I finished up my master’s degree.

I was in a group of programmers. It was a very small group, maybe three of us. Our job was to analyze all of the agricultural data on campus. Each of the land-grant universities have experiment stations — a group of 10 or so statisticians or data-analysis people who have a grant from the U.S. Department of Agriculture to design and analyze all of the experiments on campus. You can’t let grad students design an experiment. They’ll just mess it up. Computers were coming into vogue then, and we were trying to write programs to analyze data. I spent the next six or seven years doing that. A fellow named Jim Barr — he was one of the guys who was working with us — started putting together a language. I began to write procedures for regression analysis, which allows you to study the relationships between variables, and a number of other things. And that’s how SAS got started.

I think in 1969, we went to Mountain Lake, Va., where we announced the SAS — statistical analysis system — software. Everybody else at the experiment stations decided they really liked this and would use just our stuff. So we became the official program unit for the experiment stations around the Southeast. That’s where we got our breakthrough — rice and more productive hogs and cows. Cattle that produce more milk.

Essentially, all the computers at the university were paid for by National Institutes of Health grants. But in 1972, the Nixon administration directed NIH to quit funding universities for computing. We went to our experiment-station group. By 1972, almost all of them were using SAS in their work, and we told them our grant money had dried up. Would they like to support us? Each of the experiment stations agreed to chip in $5,000 a year for the continued development of SAS. But they said, “We don’t want to have to do this forever, so start trying to license this to other companies, other universities.” Fortunately, the type of work we did was very appealing to pharmaceutical companies. Almost all of them signed up to use SAS to analyze their new drug data for submission to the Federal Drug Administration. So from that period, from 1972 to 1976, we were basically on soft money. As long as we could bring in enough to pay for ourselves, we could stay.

We continued to license SAS to outside organizations, and in January 1976, we had a user-group meeting. We went down to Kissimmee, Fla. We had 350 users there who came just to hear about what we’d been working on. That really was the impetus to leave the university. We couldn’t really grow much more there. We were out of space, and it was the opportune time to leave. So we created an arrangement with the school. We left them all the money we had collected; they made us agree to take all the contracts and support them because they couldn’t. We did that. And that’s when we founded SAS Institute in early 1976. We went into full-scale operation in July. I think when we left N.C. State we had maybe 300,000 lines of code at the most. Now we have maybe 20 million or more. People were scared. The four founders, they were a little concerned about giving away all their health and vacation benefits. We could’ve stayed at the university forever if we wanted to. It was a chance that we took: Look, we think we can make this. We got Blue Cross Blue Shield to cover us, and we added enough customers to where we actually ended up with a small profit at the end of the year.

They didn’t beat our door down, but they would call. We’d answer the phone, and they’d ask if they could buy a copy of SAS, and we’d say sure. We had a law firm draw up some contracts, and we used those for many, many years to license our software. We rented an office directly across Hillsborough Street from the campus. People from the experiment stations still came there to get our help all the time. I hadn’t really thought about entrepreneurship. I had always worked for somebody else up until that time. I was, like, 32 years old when I left, so I wasn’t some dumb kid. It seemed quite natural.

WealthI’ll just make it clear: The wealth is in the value of the company, if the company is ever sold. I don’t have big buckets of money lying around.

I still go to the grocery store — I go to Harris Teeter down the street.

Work environmentI had an experience when I was working down for the Apollo project where you had to go out into the hall to buy stale coffee from a machine. Even at the university, we’d all chip in to cover the cost of coffee. It seemed to make sense to me that this is our own company, why are we going to do that? So we got a nice refrigerator and coffee maker.

One day, about a year into working there, one of our first secretaries went down to the local A&P to buy some coffee and some other stuff. We had sent a $20 check with her to cover the cost, but they wouldn’t give her change. She saw a bag of M&Ms lying there, so she added that to the purchase and then came back and put them in a jar, and everyone would eat the M&Ms.

About a week later, John Sall, one of the co-founders and current executive vice president, asked, “Where are the M&Ms?” John is the one who started the M&Ms. We still have them to this day. I haven’t eaten an M&M in 15 or 20 years. I don’t touch them. I would love to get rid of those things because in this day in age people aren’t eating proper foods, and here we are this company that believes in good health, and we have gyms and doctors, and we want people to work out. Why are we providing fatty sweets? But if we stop doing it, employees would think the company is in trouble, we’re going under or something. It’s one of those things. We have to keep doing it.

HealthThe doctor was talking about, well, you know, might need to start taking insulin if these sugar levels — it’s really not good for you. I said, “Let me tell you what. Before I do that, let me stop eating carbs and sugar.” And that thing fell right back down to normal.

I will sneak a thin-crust pizza every once in a while. I love thin-crust pizza with pepperoni and green peppers and mushrooms. They make a very good one downstairs. Every once in a while, I let them know I want my pizza.

SAS past GoodnightI’m somewhat concerned. But I think I have another 10 years to figure that out. We’ll figure out something in the interim. I don’t have any idea what I would do if I retired. SAS is just too much fun. It’s too exciting. It really is.